Are you considering a new career that better aligns with your talents, interests and values? Good for you — devoting your time to doing something you love will have an immeasurable impact on your quality of life. And while reinventing yourself through a career change can be exciting, fear of the unknown can also be unsettling, particularly when there are financial implications.
A career change may not always happen as quickly as you would like, and the journey may take some unexpected turns. It’s possible that you won’t be able to replicate your current salary when you begin your new career. Therefore, our career coaches advise careful planning in order to position yourself to better navigate this transition.
The following strategies can help you prepare your finances for a career transition:
Hold yourself accountable — Do you know where your money goes each month? Those lattes, weekly manicures and extra ATM fees may not seem like much of a burden individually but over time, collectively they can add up to money that you could save to help provide a financial cushion during a career change.
Our career coaches advise taking a close look at your monthly expenses, making a column for “needs” and “wants.” You might be surprised by the amount of money you spend on goods and services that aren’t true needs. After you complete this exercise, make a habit of asking yourself if you truly need each good or service you consider purchasing. This routine can help you keep your spending in check and your savings growing.
During your career transition, you should plan on living on less money. This does not necessarily mean living on ramen noodles or with roommates, but you will need to make adjustments.
Do your research — What is your ideal career? What type of pay range can you expect in your new job? Can you afford to maintain your lifestyle with a lower salary? These are important questions to research when you are considering a career change and the impact the change will have on your finances.
Also consider whether or not you need formalized training for your new job. If so, determine how much this training will cost and how long it will take you to complete. While you can find the answers to many of these questions online, two of the best ways to conduct career research are connecting with people in your target industry who can offer insights you may not be able to find elsewhere, and meeting with a career coach who can help you determine if your target career is the best fit for you.
Develop a side hustle — Perhaps more than ever before, now is a great time to find extra sources of income. Do you have a spare room in your home? Rent it out on AirBnB. Do you like to drive? Pick up some hours driving for Lyft or Uber. Do you want to work on freelance projects? Check out the myriad opportunities on UpWork or TaskRabbit. Even if these extra jobs are not exactly what you want to do, they will provide extra income while you make your transition.
Stay away from your retirement account — Resist the temptation to liquidate your retirement account to finance your career transition. Not only will you have a large tax burden, but you will also hurt your overall retirement goals. With this goal in mind, keep working at your current job for as long as you can to build a sizable emergency fund (financial experts suggest six to twelve months of living expenses), so you don’t have to think about turning to your retirement account for your livelihood.
Being financially prepared can help ease the transition as you make your next professional move. And while career change doesn’t happen overnight, requiring patience and persistence, the benefits can be profound — and they’re worth the wait.
What’s your best advice for financially preparing for a career change?